April saw (in the words of Maersk in its 2021 guidance) an above normal level of volatility, extended on the back of the Suez blockage.  Transpacific rates fluctuated throughout, pushing up FBX01 Q221 value from $3,375 (FIS 14 January Report) up to $4,700 (FIS 27 April 2021) report – a 39.25% increase even after an apparent stabilisation of rates after the surge that began in May/June 2020 on the back of narrow capacity and surging demand.

Levels on the trans-Pacific routes for Q221 have continued to fluctuate from mid-April onwards, as FBX01 shed value and subsequently regained value, now sitting at another spot rate high of $4,968. This has pushed up the Q221 value again, now offered in at $4,825/FEU. Further down we have started to see the result of heavy ship-ordering, with Q421 actually shedding $625 off of value on 4 May 2021, now at $2,675 and still well above the ‘normal’ level we might assume back in 2019. The boost from the third round of US stimulus has kept rates supported for far longer than was expected even in March, whilst port congestion that had previously driven rates starts to abate.

It should also be worth noting that the relative high of the Q2 prices offers an opportunity for those already fixed in on long-term contract struck at ‘early bird’ levels in Q4 2020.

On the Asia-Europe lane we have seen an inevitable impact start to trickle into the spot market, after Evergreen Ever Given was finally released from the side of the Suez Canal. Ongoing legal issues with the vessel aside, the market expected a boom and got a fizzle, with many cargoes already priced in or sailing for April. We started to see rates rebound on FBX11 and FBX13 from mid-April, after exploding at the end of the month in line with early moves on the May21 forward price for both lanes. As of writing on 4 May, FBX11 sits at $8,044, FBX13 at $8,494 on spot. The Q221 had progressed through the month, with FBX11 May21 offered in at $8,650 as of our 27 April report – this has been reflective of FAK rates we had already seen contracted on the physical market. Keeping track of the various premiums/ discounts depending on which region of Europe physical counterparties have been looking to hedge has been critical. As an example, the UK premium versus FBX11 is around +$1,500 – putting the May21 rate at near recent record highs of $10,150 – with premium physical services reaching up to $10,600 - $11,000. It should also be worth noting that the relative high of the Q2 prices offers an opportunity for those already fixed in on long-term contract struck at ‘early bird’ levels in Q4 2020. We know these contracts range anywhere between $2000 - $3000/FEU, with holders of these contracts standing to potentially lower their contract prices by selling FFAs at their current very high levels.

April has also seen a substantial growth in actionable interest in FFAs – with interest growing to up to 1,000 FEU per capacity. The bulk of liquidity and interest sits further back, from Q321 onwards. However we have already started to see buyers looking to look in full 12-24 month periods via FFAs, giving a good premise for eventual clearing of the contract and entrance of new liquidity providers from Q3 onwards. Given the substantial uncertainty in the market, particularly into 2022, this provides an opportunity, particularly for asset owners and ocean liners, to lock-in the profitability of the current market without the requirement for a flat and stable spot price (something that has come under fire from shippers’ groups in Europe, the US and now Australia).

 

About Peter Stallion, Head of Air and Containers, Freight Investor Services

Peter Stallion heads up the Air and Container Freight desks at FFA brokerage Freight Investor Services. He started his career in air freight chartering, and has a passion for emerging risk management markets and the logistics industry.



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